Unlike the first great depression where it took years for the stock market to drop to its lowest 1932.
By Daniel at 27 December, 2008, 1:41 pm
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Now we have instantaneous trading so the drop takes place much faster than the sell orders of the early 30’s.
I mention this because recessions/depressions usually follow a pattern of stock dropping then durable goods manufacturing dropping, then commodities dropping, curtailed spending, finally followed by the last shoe which is unemployment.
Stocks drop more than 20% > Capital drys up > Orders decline > commodities prices decline > spending slows or stops > unemployment go’s up.
We are in the final leg of the cycle, unemployment. However deep or protracted this part of the cycle is will determine the bottom of the depression/recession.
In order to stimulate the economy, you have to have profit so the companies will hire again. Simple fact is that the business of the country is business and the profit motive is the ultimate motivator in capitalism.
I know I sound like a supply sider but I realize there is 2 parts to the supply side theory which also includes the demand side, e.g. the consumer, business buyers, government buyers, etc. This is the difficult side to gauge because a lot of it is based on a confidence level.
Remember though that it is ultimately business and especially medium and small size companies that employ the most people in this country.
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